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IRS Update: Benefits for Businesses to Offset Cost of Paid Leave

Do you have employees who are not able to work due to circumstances related to COVID-19? You may be eligible for some relief, let us help explain. Do you have any employees who fall under one of these criteria for paid leave?

  1. Sick – Your employee has COVID-19, is self-quarantined, or is caring for a family member with COVID-19?
  2. Daycare – Your employee is caring for children whose school or daycare facility is closed?

What is the purpose of this tax credit?

The goal of the Act is to provide funds for all American businesses that need to offset costs related to paying employees leave, either for their own health needs or to care for family members.

What type of businesses qualify?

Businesses with less than 500 employees including:

  • For profit business
  • Tax-exempt organizations

Applies to wages paid during the period beginning April 1, 2020, and ending December 31, 2020.

What tax credits are available?

There are 2 new refundable payroll tax credits:

  1. Paid Sick Leave credit (80 hours) – is the sick leave for the employee care or for employee to care for family. Employee Sick Leave - Do you have any employee who is unable to work because of COVID-19 quarantine, isolation order or self-quarantine? You may be eligible to receive up to $511 per day (100% of regular rate of pay) or $5,110 in aggregate (total of 10 days) per employee. Employee Caring for Family Member Sick Leave - Do you have any employee who is caring for someone with COVID-19, subject to a quarantine, isolation order or self-quarantine? You may be eligible to receive up to $200 per day (2/3 of regular rate of pay) or $2,000 in aggregate (total of 10 days) per employee.
  2. Paid Family Leave credit (400 hours) – is the leave for the employee to care for the employee’s child under age 18 because of COVID-19 where (1) there is a closure of a school or childcare place or (2) where a childcare provider is unavailable. Employees employed for at least 30 days prior to leave request may be eligible to receive up to $200 per day (2/3 of regular rate of pay) or $10,000 in aggregate (total of 50 days) per employee.

Are there any other costs which I can count to increase the credit besides wages?

Certain expenses in connection with a qualified health plan, if excludible from employee income, can increase the amount of the credit. In addition, the employer’s share of the payroll Medicare hospital tax can also increase the amount of the credit.

What costs can be offset and refunded by this credit under this Act?

  • Employer’s 6.2% of Social Security tax

If your credit is more than the costs of Social Security and Medicare tax, you can claim a refund for the remaining credit, as it is refundable.

How do I claim the credit?

We recommend you contact your payroll service provider. You should provide them with the details of each employee and which type of credit they qualify for so they can obtain the credit for you.

If you have any questions, please call us at 352-369-1120.

Click the buttons below for additional DOL & IRS information.
IRS Source: Tax Credit to Help Cost of Employees
DOL: Families First Coronavirus Response Act

- Russell C. Lindsay, CPA | Partner

 

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